Nortel pensions' court boost
Firm's ex-employees to benefit from landmark ruling
Published 26/07/2013 | 01:30
Over 200 former employees of bust communications company Nortel will no longer be considered 'preferential creditors' after a landmark legal ruling.
Canadian firm Nortel dismissed 228 employees without notice or redundancy pay in March 2009 after the firm went into administration in January 2009.
Its 34-acre Monkstown facility – now bought over by plane-maker Bombardier – employed as many as 1,000 people at its peak.
Now it has emerged that former employees with pensions at Nortel could be treated in the same way as other creditors, a Supreme Court ruling found this week.
The decision follows years of legal wrangling after investment bank Lehmans went bust in 2008 with its UK-based pension fund £148m in the red and communication giant Nortel's European fund was £2.1bn in debt when it collapsed in 2009.
Company administrators had asked for clarification of the law after the Pensions Regulator moved to issue against them a financial support direction – a statutory scheme designed to protect employees from under-funded pension schemes.
The decision overrules previous findings by the High Court and the Court of Appeal that the costs of complying with an FSD issued against an insolvent company would rank as an expense of administration or liquidation.
Jonathon Land, partner at PwC and adviser to the trustees of the Nortel Networks UK Pension Trust Ltd, said that the ruling determines once and for all that FSDs will rank alongside other unsecured creditors in UK administrations.
"This is the fairest result and after three years of litigation UK pension schemes and insolvency practitioners will be thankful they finally have clarity on this issue," he said.
"This is also a great result for members of pension schemes and in some cases will make a real difference to their pension in the case of an administration.
"Insolvency practitioners will now also be able to more accurately estimate the financial impact of FSDs in UK administrations and ultimately make quicker distributions to all creditors."
The European administrators of Nortel brought the issue to the Supreme Court along with the administrators of Lehman Brothers following the crystallisation of a £2bn claim from the UK pension scheme on insolvency.
PwC has been acting as the financial adviser to the Nortel UK Pension Scheme since 2009.